Court name
Commercial Court of Uganda
Judgment date
3 November 2014

Oketch v Awang (Miscellaneous Application-2013/1046) [2014] UGCommC 224 (03 November 2014);

Cite this case
[2014] UGCommC 224

                                       THE REPUBLIC OF UGANDA

                        IN THE HIGH COURT OF UGANDA AT KAMPALA

                                          [COMMERCIAL DIVISION]

                                   (Miscellaneous Application 1046 OF 2013)

                            (ARISNG FROM CIVIL SUIT NO. 2016 OF 2013)

OKETCH PETER;;; :::::::::::::::::::::::::::::::::::::::::::::::::::: APPLICANT

                                                                 VERSUS

AWANG JIMMY :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: RESPONDENT       

                                    

BEFORE HON. JUSTICE B. KAINAMURA

 

RULING

This application is brought by Notice of Motion under order 36 rule 11, Order 52 rule 1, 2 & 3 of the CPR and section 98 of the Civil Procedure Act. The Applicant seeks orders;

  1. That the execution HCT-EMA-NO.2016 of 2013 arising out of Civil Suit No. 403 of 2013 be set aside/ be stayed,
  2. That the Judgement / Decree passed on the 29th day of August 2013 and the 13th day of September 2013 Exparte in Civil Suit No. 403 of 2013 be set aside,
  3. That the applicant be granted unconditional leave to appear and defend Civil Suit No. 403 of 2013.
  4. Costs of the application be provided for.

The grounds of the application briefly as set out in the Notice of Motion are that;

  1. The applicant was prevented by sufficient cause from filing an application for leave to appear and defend the suit as he was not served with the summons in the above matter.
  2. That the applicant is not indebted to the respondent as claimed in Civil Suit No. 403 of 2013 as he cleared the whole amount and intends to counter claim the excess money paid to and received by the respondent.
  3. The applicant has a good and valid defence to the claim in Civil Suit No. 403 of 2013.
  4. Civil suit No. 403 of 2013 raises triable issues that cannot be disposed of in a summary manner by way of a specially endorsed plaint.
  5. The applicant shall suffer sever damages and great injustice if the application is not granted.
  6. The threat of execution is imminent as a warrant of arrest in execution of the decree has been issued.
  7. The application was made without unreasonable delay.
  8. It is in the interest of justice that the prayers in the application are granted.

In the affidavit in support of the application the applicant sets out the grounds of the application, they are that;

on the 26th of November he was shocked by a phone call from a person who introduced himself as a court bailiff that a warrant or arrest in execution of a decree in Civil Suit No. 403 of 2012 and EMA No. 2016 of 2013 had been issued against him.

he contacted his lawyers who perused the court record/ file and found a default judgement and decree entered against him on the 29th of August 2013 and decree signed on the 13th September 2013.

he was not effectively served with summons in order to apply for leave to appear and defend as required by law.

The process server’s affidavit is full of falsehoods that he was served yet he was in Kotido District at the time.

the applicant is not indebted to the respondent and intends to counter claim the excess money he paid to the respondent.

on the 29th day of November 2011 the applicant entered a loan agreement with the respondent for the sum of 52,000,000/= and was to pay interest of 15% interest for the initial period of five months.

the loan was secured by land comprised in Kyaggwe Block 109, Plot 1122, Nvunwa-Seeta-Mukono and further secured the same by three post dated cheques drawn on Stanbic Bank totalling to UGX 23,400,000/=.

the applicant has been honouring his obligations and paid up to UGX 94,700,000/= and is surprised to hear that the claim is for UGX 250,000,000 and later UGX 415,525,000.

The applicant has been affected by the exparte judgement and has serious objections to it which merit serious objections which merit serious judicial considerations in that the applicant was denied opportunity and yet he has a good and valid defence.

Civil Suit No. 403 of 2013 raises serious triable issues that cannot be disposed of in a summary suit by a specially endorsed plaint.

It is just and equitable that the orders sought are granted.

The applicant filed a supplementary affidavit in which he stated that he had also paid UGX 5,200,000/= on the 8th day of March 2013, then paid UGX 9,000,000/= and UGX 4,200,000/= which were deposited on the respondent’s account on the 26th June and 24th July 2012 respectively.

 In addition he deponed that on the 17th day of July 2013 through his brother John Bosco Odong he made another payment of UGX 23,400,000/= upon the directive of the respondent. He concluded that Civil Suit No. 403 of 2013 raises triable issues that cannot be disposed of in a summary suit since the interest charged was harsh and excessive.  He added that the application for stay of execution has been made without unreasonable delay and that the execution has not been completed.

In the affidavit in reply, the respondent deposed that;

the stay of execution and setting aside the decree is made in vain and has no merit as the said application has been overtaken by events and execution has been completed and a return of the warrant has been made.

The applicant was served at 2:46pm at his residence and in the presence of his wife as per paragraphs 2,3,4,5 and 6 of the affidavit of service by Wandera Moses who effected service. He added that the applicant just deliberately refused to file a defence arguing that the suit would tarnish his reputation.

the respondent met with the applicant on the 28th July 2013 in Ntinda and therefore the allegation that the applicant was in Kotido on their date was not true.

the applicant has always been aware of the impending execution and promised to settle the claim with the respondent.

the applicant failed to honour his promise to settle the claim and the respondent had bailiffs appointed. A warrant by consent was executed dated 26th November 2013 signed by the bailiff and the applicant and witnessed by his wife in which the applicant handed over a copy of his passport and certificate of the title in respect of property comprised in LRV 4462, folio 5, plot 86 Police road at Adyei, Lira District as security of the decretal sum and the warrant and securities were filed in court.

the applicant made payment of 23,400,000/= after a case of issuing bounced cheques was lodged against him at the central police station and thereafter HCCS NO. 403 of 2013 was filed.

the applicant by consent dated 26th Nov 2013 partially settled the decree in this suit by surrendering his land comprised in Kyadondo Block 109 plot 1122 land at Nvunwa-seeta Mukono and LRV 4462 Folio 5, plot 86 Police Road at Adyel.

The properties have since been disposed off in accordance with order of court dated 28th Nov 2013 from which UGX 138,000,000/= was realised and          UGX 277,000,000/= remains due and owing.

the application is frivolous and vexatious intended to frustrate the consent settlement of the decretal sum.

HCCS No. 403 of 2013 was settled and a consent duly signed by the applicant and therefore there is nothing to stay or set aside.

In the second affidavit in reply deponed by Barnabas Twesigomuhangi, the bailiff who handled the execution it was deposed that;

this application is made in vain and has no merit because the execution has already been completed and a return of the warrant has been made.

the warrant of arrest in execution had expired unexecuted and there was an instruction by M/S Kimanje Nsibambi Advocates to have the same renewed and executed.

In a supplementary affidavit in reply sworn by the respondent, he deponed that;

The application for stay of execution and setting aside the decree has been overtaken by events as the above matter was by consent settled and a court order dated 16th April 2014 acknowledged the same and stated that the matter was closed.

Submissions

Counsel for the applicant in his submission raised two issues;

  1. Whether there was effective service on the applicant
  2. Whether the applicant is entitled to the relief sought

Answering issue one, he cited Order 5 Rule 10 of the CPR and Emiru Angose vs. Jas Projects Ltd Misc. Appln. No. 429 of 2005(unreported) emphasising that service should be done on the defendant in person. He submitted that with reference to annexure C in paragraphs 2, 3, 4,5,6,7 and 8 there was not proper service envisaged under Order 5 Rule 10 of the CPR. He added that the applicant on the purported day of service was in Kotido. He stated that the mode of service adopted by the respondent is not backed by law thus leading to an irregular judgement under which the applicant wants to derive unjust enrichment. It was his argument that the affidavit of service was full of falsehoods and the service was irregular.

Counsel further argued that the process server did not comply with the mandatory provision in Order 5 rule 16 of the CPR which requires that the name and address of the person identifying the person served should be stated. Counsel argued that refusal to receive the summons by the respondent could not hold since there is an alternative in Order 5 Rule 18(1) of the CPR of substituted service. He cited the case of Katuluku Vs Transocean (1974) HCB 46 where it was held that service should be personal or substituted with leave of court failure of which there is no proper service.

He also cited the decision in the case of Mulenga Christopher Vs Stanbic Bank (U) Ltd Misc Appl No. 200 of 2013 where it was held that if service was not effective the court may set aside the decree.

Additionally, Counsel cited the case of Gatete Geoffrey & Angella Maria Nakigonya Vs William Kyobe SCCA No. 7 of 2005 where Mulenga JSC (as he then was) RIP stated that the desired and intended result of serving summons on the defendant is to make the defendant aware of the suit brought against him so that he has the opportunity to respond to it by either defending the suit or admitting liability and submitting to judgement.

Counsel further cited the case of Emiru Angose vs. Jas Projects Ltd Misc. Appln. No. 429 of 2005(unreported) where it was held that an exparte judgement obtained by default is by its nature not a judgement on merit and is only entered because the party concerned failed to comply with certain requirements of the law. The court has power to dissolve such judgement which is not pronounced on the merits of the case or by consent but entered specifically on failure to follow procedural requirement. Counsel prayed that the court be pleased to set aside the decree since the service of summons was not effective and not done as envisaged in the law. He added that the applicant has a defence that raises triable issues hence prayed that the applicant be granted unconditional leave to appear and defend Civil Suit No. 403 of 2013 on its merits.

On issue two which was whether the applicant is entitled to the relief sought, Counsel submitted that on the balance of probabilities, court should find that there was no effective service on the applicant and the orders prayed for in the application be granted.

Counsel for the respondent first raised a preliminary objection to the effect that the application to set aside the exparte judgement and decree has been overtaken by events. He stated that this was because the decree had already by consent been partially executed, the applicant was aware of the claim even before service and there was effective service as per the affidavit of Wandera Moses. He submitted that the case was concluded/closed when the parties settled in terms of the court order dated 16th April 2014 which order still stands and is unchallenged. He added that the properties were valued and disposed off as per the court order dated 28th November 2013. A sum of UGX 138,000,000/= was realised and UGX 227,702,000/= is still outstanding. He thus prayed that for this alone the application be dismissed with costs on grounds that it was overtaken by events and therefore there is nothing to stay or set aside.

Addressing the issue of service of the summons, Counsel submitted that there was effective service done on the 25th July 2013 at 2:46 pm at the home of the applicant in the presence of his wife by Mr. Wandera Moses the process server as deponed in paragraphs 4, 5 and 6 of the respondent’s affidavit in reply dated 7th March 2014. He cited the case of Shah Vs Mbogo & Another [1967]1 EA 116 when it was held that applying the principle that the court’s discretion to set aside judgement/decree is intended to avoid injustice or hardship resulting from accidental inadvertence, or excusable error, but not to assist a person who deliberately sought to obstruct or delay the cause of justice, Counsel argued that this motion should be dismissed.   

He submitted that on the day in question, it is not true that the applicant was not in Kampala. He also relied on the case of Gatete and Angella Maria Nakigonya (supra) that the purpose of service is to make the other party aware of the claim and it was his contention that the applicant was aware of the claim. He stated that the applicant has not satisfied court that he has a defence on merit and has not even bothered to file a copy of a defence to the case. Regarding this point, Counsel cited the case of Arochu Vs Kasim (1978) HCB 52 in which court held that before setting aside an exparte judgement, court must be satisfied not only that the defendant had a reasonable excuse for failing to enter appearance but also that there is merit  in the defence or the case itself. He added that merely stating that there are triable issues does not necessarily mean that there is a credible defence.

In conclusion it was Counsel’s prayer that the application be dismissed with costs on grounds that;

the application has been overtaken by events as the applicant by consent dated the 26th November 2013 and order dated 28th November 2013 settled the case which has been partially executed and a balance of UGX 277,702,000/= is still outstanding.

there was effective service made on the defendant but he refused to accept service and deliberately chose not to file his defence.

the applicant has failed to satisfy court that he has a defence with merit.

In rejoinder Counsel reiterated his earlier submissions stating that there was no service of summons and the respondent obtained an irregular judgement. He prayed that the court makes a finding that there was no effective service on the applicant.

Addressing the preliminary objection, Counsel submitted that the application has no been overtaken by events and that there was never any consent settlement to dispose of Civil suit No. 403 of 2013.

Regarding the issue of whether there is a defence or not, Counsel relying on paragraphs 8 to 13 and 15 of the applicant’s affidavit in support of the Notice of Motion argued that the applicant has triable issues as demonstrated. He prayed that the applicant be granted unconditional leave to appear and defend Civil Suit No. 403 of 2013.  He submitted that there was no warrant of attachment and sale issued by court let alone any advertisement of the applicant’s property to authorise any sale. He thus prayed that the application be allowed and with costs.

In rejoinder to the preliminary objection Counsel for the respondent reiterated his earlier submissions and stated that both the orders dated 28th November 2013 and 16th April 2014 have not been challenged or set aside and are still standing and as such are not illegal as claimed by the applicant.

He concluded that the application be dismissed with costs on grounds that;

  1. The application has been overtaken by events as the applicant by court order dated 28th November is still due and owing on the decretal sum as per the return.
  2. There was effective service made on the defendant upon which the court based to enter the default judgement.

 

Decision

I have perused the application and the affidavit’s filed in support and against it. The application is for stay of execution in EMA No. 2016 of 2013, setting aside the Judgement/Decree arising out of the above written Civil Suit and granting the applicant unconditional leave to appear and defend the suit. However at the hearing, the respondent first raised a preliminary objection to the effect that the application now before court has been overtaken by events in as far as the parties by consent have partially executed the decree. I will deal with that first.

I have looked at the consent Order of 16th April 2014 on which the respondent’s preliminary objection is premised and it is to the effect that:-

  1. By consent of both parties the warrant of arrest against the Applicant in respect of execution of EMA No. 2016 of 2013 was withdrawn and consent settlement reached which was partially executed. (emphasis mine)
  2. Since there is no warrant this matter is closed.

The partial execution mentioned above relates to another order before the Deputy Registrar, Bailiffs and Executions Division when the Warrant in execution of the decree was returned on 28th November 2013 and the order was to the effect:-

  1. The defendant has paid the decretal sum of Shs. 406,000,000/= by way of land comprised in plot 1122 Block 109 East Buganda Kyagwe Land at Nvumwa Mutuba II it and Leasetold Registrar SL/54876 Volume 4462 Folio 5 Plot 86 Police Road Lira District in full and final settlement of the decretal sum.
  2. In the event that the decretal sum is not realised after valuation and sale of these properties the plaintiff shall execute for balance thereof.  (emphasis mine)

 Additional return on a warrant in Execution filed on 16th December 2013 is to the effect that:-

“Further to my return of 28th November 2013 i have been made to understand that the judgment creditor sold off the two Plots of Land given to him by the Judgement debtor as full and final settlement (sales agreement are on file for ease of reference) that the amount realised in all sales is only Ug Shs. 138,000,000/= (One Hundred and

Thirty Eight Thousand Shillings Only) of the decretal sum of Shs. 415,702,000/= there by having balance of 277,702,000/=.

The plaintiff has retained me and further instructed me to recover this balance of UGX 277,702,000/= AND i humbly pray that a fresh warrant do issue for the same amount against the judgment debtor. (emphasis mine)

The above is, contrarily to the respondent’s assertion, a clear manifestation of the fact that execution of the decree is still in progress and accordingly the application now before me has not been overtaken by events. In the result the preliminary objection is overruled.

I will now turn to the substantive application. It was the applicant assertion that he was prevented by sufficient cause from not filing an application for leave to appear and defend C.S No. 403 of 2013, the reason being that he was not served with summons in the matter. He contends that service on him was not effective since the service was not in the manner prescribed by law and that the affidavit of service relied upon was full of falsehoods since on the date of the alleged service he was in Kotido. In reply, the respondent contended that the applicant was duly served at his residence in presence of his wife and it was on the basis of that, that judgment was entered against him.

It is indeed correct as submitted by Learned Counsel for the applicant that Order 5 rule 10 enjoins a plaintiff to effect service on the defendant either in person or on his/her agent. (see Emiru Angose Vs Jas Projects Ltd Misc Appl No. 429 of 2005 unreported).

In addition Order 5 rule 14 provides:-

“Where a duplicate of the summon is dully delivered or tendered to the defendant personally or to an agent or other person on his or her behalf, the defendant or the agent or other person shall be requested to endorse an acknowledgement of service on the original summons except that if the court is satisfied that the defendant or his/her agent or other person on his or her behalf has refused so to endorse, the court may declare the summons to have been duly served”. 

The sum total of the above is that personal service means giving a copy of the document to the person to be served. However, it is recognised that should the person to be served refuse to accept the document, personal service may nevertheless be deemed to have been effected provided the nature of the document is made known to the person. In Geoffrey Gatete and Angelo Maria Nakigonya Vs William Kyobe SCCA No. 7 of 2005 Mulenga JSC, (as he then was) RIP stated that “effective service” means having the desired effect of making the defendant aware of the summons.

In the affidavit in reply, Awange Jimmy the respondent attached annexture C which is the affidavit of service relied on by the trial court to enter a default judgment. In the affidavit of service of 28th August 2013 Moses Wandera the process server deponed that the applicant/defendant received the summons on 25th July 2013 but refused to sign indicating that he was going to settle the matter with the respondent/plaintiff. It is evident on court record that upon entering the default judgment, the applicant/defendant has gone some way in settling the decretal sum through surrendering land tiles for land at Nvumwa Mukono and plot 86 police road Lira which land has since been sold at UGX 18,000,000/= (Shilling Eighteen Only) and UGX 120,000,000/= (Shillings One Hundred and Twenty Million Only) respectively. This has left an outstanding balance of          UGX. 277,000,000/= (Two Hundred and Seventy Seven Million Only).

In the affidavit in support of the Motion, the applicant/plaintiff depones that he was not served with summons in C.S No. 403 of 2013 as on the date mentioned by the process server as on that date, he was in Kitgum. In support of this he annexed to the said affidavit annexure E which is a receipt from a Hotel in Kitgum along with cash sale for purchase of fuel from a Petrol Station in Kitgum. What begs an answer then is, why did the applicant go ahead and partially settle the decretal amount when, as it were, he had a plausible explanation to challenge the default judgment. To my mind the affidavit of service of 28th August 2013 relied on by the trial court is cogent enough and cannot be assailed by that of the applicant deponed.

For this reason alone the application must fail.

Before i take leave of this application, it is pertinent that i comment on the issue of interest charged. According to the Decree of 13th September 2013, the applicant/defendant was ordered to pay interest at the rate of 15% per month from date of default till payment in full. That works out to an interest rate of 180% per annum. As a matter of fact as of 15th November 2013 interest had accumulated to UGX 179,400,000/=.

Whereas the issue of interest was not raised by Counsel for the applicant, it is now settled that court may in exercise of its inherent power make such orders as may be necessary for the ends of justice or prevent abuse of the process of the court. In the case of National Union of Clerical Workes, Commercial and Technical Employees Vs National Insurance Court CA No. 17 of 1993 (Supreme Court), it was held that the question whether court should invoke its inherent powers in any given case is a matter of the courts discretion to be exercised judicially. It is accordingly my view that notwithstanding the fact that the issue of interest was not canvassed by Learned Counsel for the applicant, it is pertinent that court looks at it in more detail.

Section 26 (1) of CPA provides:-

“Where an agreement for payment of interest is sought to be enforced and the court is of opinion that the rate agreed to be paid is harsh and unconscionable and ought not to be enforced by legal process, the court may give judgment for the payment of interest at such rate as it may think fit” (emphasis mine)    

In the case of Bagoka Vs Kibwaijana [1976] HCB 383, court held

“By S. 26 CPA a discretion is vested in the court to say what rate of interest is harsh and unconscionable irrespective of the practice of the people lending money in the country and the court has discretion to reduce the rate of interest as it thinks fit” 

Based on the above, it is my considered opinion that a rate of interest of 15% per month (which works out at 180% annum) is excessive, harsh and unconscionable and should be reduced. I so hold.

In the result for the reasons first set out above in this ruling, this application fails except that in the exercise of courts inherent powers, the interest of 15% per month agreed upon between the parties and entered in the judgment in default is set aside and substituted with interest at 20% per annum.

Accordingly the applicant will pay interest at the rate of 20% per annum from the date of default till payment in full. The amount of money already paid in satisfaction of EMA No. 2016 of 2013 should be taken into account in determining the amount outstanding and due to the defendant if any. 

Each party to bear its own costs.    

 

B. Kainamura

Judge

03.11.2014